3 Steps to Secure a Rich Retirement Pay yourself first by setting aside savings and having a plan for the long term.

By Pamela Yellen

Opinions expressed by Entrepreneur contributors are their own.


By now it's clear that business owners and other professionals who work for themselves need to take charge of planning and saving for their own retirement. Most small-business owners can't count on selling their companies to pay for retirement. And conventional, government-sponsored retirement plans come with hidden wealth traps.

All of which adds up to the reason business owners, entrepreneurs and other self-employed folks need a "Plan B." Here are three surprisingly simple keys to finishing rich as an entrepreneur, business owner or other self-employed professional:

1. Increase your profits and your personal wealth.

Learn everything you can about "direct-response marketing." This tactic lets you track every dollar you spend to the return on investment you get from it. Don't let anyone talk you into any other kind of marketing, which is designed to make them rich at your expense.

Equally important: Keep increasing the money you pocket from your business. No doubt you've seen the sobering illustrations that reveal how much money you'll need to have a comfortable retirement. Ideally, you should pocket at least $1 million a year.

Related: How to Double Your Desired Income in the Next 6 Months

2. Keep your lifestyle in check.

British economist C. Northcote Parkinson wrote an insightful little book called "Parkinson's Law." In it, he notes: "A luxury, once enjoyed, becomes a necessity." Smartphones didn't exist all that long ago, but today most of us can't imagine not having one with us at all times. Parkinson also pointed out that "expenses rise to equal income." How true is that! Have you ever noticed how quickly your increased income is absorbed by a new "necessity?"

Related: 4 Bad Money Habits That Have Left Millionaires Broke

We're blasted 24/7 by advertising in every imaginable medium. How can you resist so many messages to buy, buy, buy in order to be happy, respected, sexy or successful? You simply need a few tricks up your sleeve to beat the advertisers at their own game.

Self-impose your own 24/7 rule. Except for basic necessities, wait 24 hours before making small purchases. For larger purchases, such as a new appliance or television, wait seven days to consider whether you really need the item before you make the purchase. If you're eyeing a major purchase -- think new car or luxury vacation -- wait 30 days. Do this consistently for a month, and you'll be amazed by how many things you "needed" have lost their pull.

Use cash. Use those greenbacks for everything you can (other than paying bills). Studies show it could decrease your spending by 20 percent, and you won't feel a bit deprived. Debit cards don't have the same effect, even if the purchase is coming directly out of your checking account.

Go for the "Big Happy." No matter what Madison Avenue wants you to believe, your deepest happiness comes from experiences and relationships, not from things. We quickly get used to having new stuff. But the memory of screaming down a zip line or taking your family to swim with the dolphins can last a lifetime.

Related: Want to Be Happy? Stop Doing These 10 Things

3. Create a safe money plan to save the difference.

It's no secret our nation's savings rate is abysmal. Many people think if they're saving 10 percent or 15 percent of their income, they're doing pretty good. By comparison, they are. But consider the reality of how much money you'll really need to accumulate to enjoy a decent standard of living in retirement -- one equal to or greater than your lifestyle while working. Saving 10 percent or 15 percent won't cut it.

You should work toward saving 20 percent, 30 percent or even 40 percent of your pre-tax income. It can be done. And if you increase your savings by 2 percent or 3 percent each year, you'll be surprised by how fast your nest egg will grow. You won't even feel a pinch.

Protect your perfect 'Plan B' for retirement.

There's a critically important difference between "saving" and "investing." Saving means placing money you can't afford to lose in a vehicle that is safe and has guaranteed growth. You're certain your money will be there when you need it. In contrast, investing involves placing money in a financial vehicle or an asset that has a certain amount of risk. You hope to make a gain, but it's not guaranteed. In fact, you might even lose your original investment money.

The only money you should invest is money you can afford to lose -- or money you're able to let languish in the market for at least 20 years, if necessary, until it recovers. Why 20 years? Because since 1929, we've weathered three market crashes that stunned the Dow so sharply, it took between 16 and 25 years to return to its pre-crash level.

Could something like that happen again? No one knows for sure, of course, but history does have a way of repeating itself. Can you imagine the impact on your retirement and current lifestyle if you had to wait 25 years for the market to recover? That's one reason it's so important to create a safe and secure plan to pay for your retirement.

Related: Business Owners Need a 'Plan B' for Retirement

Wavy Line
Pamela Yellen

Financial security expert

Pamela Yellen is a financial security expert, a two-time NY Times best-selling author and President of Bank On Yourself. Pamela's latest book is "Rescue Your Retirement: Five Wealth-Killing Traps of 401(k)s, IRAs and Roth Plans – and How to Avoid Them."

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